Much of the discussion about ‘no deal’ has focused on the UK.
It has detailed how Number 10 might force ‘no deal’ through, and speculated on the possibilities and prospects of parliament being able to prevent it. The preparedness of the UK, and the fallout on day-to-day life and commercial activity, have also been considered.
Although these are obvious concerns, it is important not to overlook other consequences of leaving without a deal. ‘No deal’ will have an immediate impact on negotiations with the EU. Specifically, it will terminate the Article 50 process. While many Brexiteers have never been happy with Article 50, it is not at all clear that bringing it to an end will be to the UK’s advantage.
Nor is it obvious, contrary to Foreign Secretary Dominic Raab’s suggestion on BBC Radio’s Today programme on 29 July, that leaving without a deal will strengthen the UK’s position in the negotiation of a future trade agreement. As well as the procedural issues that ‘no deal’ will entail, the relationship between the UK and the EU is unlikely to be improved.
Procedures and processes
The UK’s withdrawal is currently being negotiated under Article 50, which sets out a procedure created specifically for a member state that has decided to leave the EU. Such a state can, at a time of its choosing, open a two-year period of negotiations to settle outstanding liabilities and agree the shape of its future relationship with the EU.
Any withdrawal agreement must have the support of a ‘qualified majority’ of the European Council and is subject to the approval of the European Parliament. It does not need to be ratified by national parliaments.
Article 50 is intended to provide for an orderly and minimally disruptive exit. The two-year period it imposes is intended to concentrate minds.
But Article 50 also allows the deadline to be extended if requested by the departing member state and agreed unanimously by the other member states, as it has been twice. Moreover, Article 50 negotiations are a matter of high priority for the EU.
The European Council, Council of the European Union, and the European Commission have devoted considerable resources to the process, which have been focused on the EU negotiator, Michel Barnier. They have worked closely together with each other and with the European Parliament.
The European Council and the European Commission have also been concerned to ensure a continuous flow of communication between the EU institutions and the capitals of the EU27. It is not at all clear that the negotiations would have the same level of priority or resource under another arrangement.
Leaving without a deal would instantly change the UK’s status. No longer a leaving member state, the UK would be outside the EU as a third country.
As of 1 November 2019, the Withdrawal Agreement would be officially dead, and the implementation (or transition) period for which the Withdrawal Agreement provides would also disappear. Article 50 would no longer apply, nor could it be reopened retrospectively by the EU, despite some recent suggestions to the contrary.
Should the UK ever choose to reapply for membership in the future, it would have to follow the route set out under Article 49, essentially starting the process of accession from scratch. Both sides have devised contingency arrangements to ensure basic connectivity in the event of ‘no deal’, but these measures are generally time-limited, rudimentary and dependent on reciprocal action.
Such arrangements are unlikely to provide the certainty or security that is necessary over the long term, and it will be necessary for the UK to return to the negotiating table. The difference would be that, with Article 50 gone, trade negotiations would take place under the EU’s normal procedures for managing commercial relations with third countries.
Although the future relationship would also have been negotiated under Article 218, there is a sharp difference between a path from the Withdrawal Agreement via a transition period, the negotiation of a trade agreement and into a new relationship with the EU, and the ‘no deal’ route of termination, no transition, short-term contingency, and an eventual return to the table amidst rancour and distrust.
Setting aside the difficult climate that ‘no deal’ is likely to create, the process of negotiating a new relationship would be time-consuming and procedurally more difficult. Before the negotiations could begin, the European Commission would need a new negotiating mandate from the political leaders of the EU27.
Then, whereas Article 50 provides for a two-year period, Article 218 does not foresee a time limit. The negotiation of trade agreements typically takes several years, which is then followed by a process of ratification. The EU’s free trade agreements with South Korea, Canada, Singapore, Japan and Vietnam took between six and eight years to negotiate, with some of them still awaiting ratification.
The more complex association agreements with Ukraine and Georgia – which were more in line with the ambitious aims set out by Theresa May’s administration – took between five and eight years respectively.
If the UK wanted to pursue a very narrow free trade agreement, covering the few sparse areas that fall within the EU’s exclusive competence – listed in Article 3(1) of the Treaty on the Functioning of the European Union – the negotiations would be carried out by the Commission.
Since the EU alone has decision-making power in those areas, a qualified majority would be sufficient on the EU side to approve the agreement. However, once the scope of the negotiations extends beyond areas within the EU’s exclusive competence to those where member states have decision-making authority, such as aviation or financial services, a mixed agreement would be necessary. Negotiation and ratification would involve both the EU and the member states.
Any agreement would require the approval of all parliamentary bodies in the EU27, which effectively grants a veto to national and, depending on constitutional arrangements, regional parliaments. The refusal of a single regional parliament to give its assent could lead to a delay. This happened, for example, when the Wallonian parliament in Belgium initially refused to ratify the EU’s trade deal with Canada.
Fundamentally, in such a scenario, the Irish backstop, the UK’s financial contribution, and guarantee of EU citizens’ rights, including a role for the Court of Justice of the European Union – which have caused such difficulty on the UK side – would not go away. All three issues are likely to reappear, since in all probability the EU will insist on making their resolution a precondition for trade talks.
The EU response
All of the indications since the installation of the new Prime Minister suggest that there has been no change on the EU side. In the face of declarations by Boris Johnson that the UK will leave the EU on 31 October, ‘do or die’, the EU has repeated that it is ready for all outcomes, including ‘no deal’.
Nor is there any sign of any fracturing of the unity within the EU27 since the statements released by the EU institutions on the day after the UK referendum. Of course, given that some of the EU27 are more exposed to the effects of ‘no deal’ than others, that unity may yet be tested.
The EU has made it clear that the Withdrawal Agreement will not be reopened. From an EU perspective, the outcome of the negotiations reflects red lines imposed by London. The EU also believes that it has made important concessions to the UK, including a transition period, which allows the UK to benefit from many of the privileges of EU membership until a future trade agreement comes into operation.
On the issue of the backstop, the expansion of the customs union from Northern Ireland to the whole territory of the UK was made at London’s request despite the fact some member states – among them France — harboured reservations about the enforcement of EU rules.
In addition, the EU agreed to Theresa May’s request for a codicil on the Withdrawal Agreement, on the grounds that such a guarantee would increase the chances of parliamentary approval.
There are different estimates of which side is best prepared for ‘no deal’. The EU began preparations for this possibility in 2017 on the basis it should be ready for all outcomes.
UK efforts were geared up for 29 March, then for 12 April and 30 June 2019. Current assessments are difficult since many departments, services and providers are bound by non-disclosure agreements.
However, most commentators agree that both sides will be adversely affected.
‘No deal’ will not deliver the clean break from the EU that some pro-Brexiteers believe. Although the contingency agreements might mitigate some of the worst disruption, a long-term settlement will require the UK to return to the table, where it will no longer benefit from Article 50 status.